This started just one year ago. A standard case came across my desk and I showed one couple how my approach might give them more control over retirement assets. They had been to a seminar and got the usual pitch. Being a few years from retirement they had already decided to protect some assets and an annuity is a good way to do that while also making sure all retirement income is secured. But as is common, they felt like there might be a better alternative to the usual pitch. At the time I wrote the below newsletter to remind everyone of the benefits of a different approach.
It works for some but not others. Many people are skeptical of annuity performance and a common sentiment is that an insurance company is going to change the rules and offer nothing on the back end. For those it’s a risk to not take the guarantee but I’ve tried for a long time to convince people it’s not that hard to beat a guaranteed income contract.
On a side note, there was something really cool about that post last year. An advisor left a comment to the article asking if I’d recommend a contract for his personal portfolio. It’s not the first time that has happened. I know of at least a dozen retiring advisors who have designed their personal plans based on information from this website. Food for thought…
This couple decided to skip the guaranteed income contract and go with something that had no fees and much more growth potential. It was a good move that just paid off in the first contract year. It may have been hard to see the money not moving when the market was at an all-time high earlier this year and then a relief in March when 30% of the value was stripped away in a matter of a couple weeks. Sure it’s coming back now but what a wild ride. For anyone who isn’t a professional trader the past year has not been a settling experience.
Over the past few weeks I showed you some things to avoid and then something that works. Rather than another hypothetical performance, below is actual proof of something that worked well in spite of all the global drama. I’ll explain a few important points below but first click the link below to view the pdf. It should be all the explanation anyone needs.
Yes, this contract gained a hair over 12% when the market had one of the wildest 12 month periods ever. The market is up from a year ago by about the same amount, but which was the better ride to get here?
Correct, there are no fees in this contract. Interest credits are net to the account value and death benefit. Many have a hard time believing this but it’s quite true.
They could surrender this contract and still walk away with a 4.5% yield, but that would be silly. Having those out of the way in the first year opens up a tremendous amount of flexibility
Don’t forget, the earnings are now locked and guaranteed in the contract and can never be lost or taken away. Again, no ongoing fees to drain the principal if it doesn’t grow next year.
For the critics who think insurance companies are out to take advantage of people, all cap, participation and spread rates for the available indices remained exactly the same for the second year. You’ll have to take my word for it. You only get to see what I show you with consent from the client but you can always buy your own to get a look at the full five page document in a year.
Annuities aren’t scary or too complicated. Protect money and get upside growth potential. You can take the guaranteed income and there’s nothing wrong with it but it’s a good idea to explore alternatives as well. Some contracts are good and others aren’t all that great so it pays to work with someone who is used to competitive situations and has a broader view of all the options.
I am happy for these guys and I really just want to see all of you be successful in retirement. It won’t always produce like this but it’s nice to see at a time when the world seems to be falling apart. I’ll continue working to dispel myths and offer education so people can make objective decisions. It is just not as hard as you think.
Enjoy the weekend…